A Common Trends Model: Identification, Estimation and Inference
1993 (English)Report (Other academic)
Common trends models provide a useful tool for studying growth and business cycle phenomena in a joint framework (see King, Plosser, Stock and Watson (1991)). In this paper we study the problem of how to estimate and analyse a common stochastic trends model for an n dimensional time series which is cointegrated of order (1,1) with r < n cointegration vectors. Identification of k = n - r permanent (trend) and r transitory innovations is discussed in terms of impulse responses and variance decompositions. Finally, we derive analytical expressions of the asymptotic distributions for estimates of these functions, thereby making formal hypothesis testing and inference possible within this framework.
Place, publisher, year, edition, pages
Stockholm: IIES , 1993. , 43 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 555
cointegration, common trends, impulse response function, permanent and transitory shocks, variance decomposition
IdentifiersURN: urn:nbn:se:su:diva-41875OAI: oai:DiVA.org:su-41875DiVA: diva2:338084